Order Code RL34180 Paraguay: Background and U.S. Relations September 20, 2007 Nelson Olhero Research Associate Foreign Affairs, Defense and Trade Division Mark P. Sullivan Specialist in Latin American Affairs Foreign Affairs, Defense and Trade Division Paraguay: Background and U.S. Relations Summary The demise of the long-ruling Stroessner military dictatorship in 1989 initiated a political transition in Paraguay that has been difficult at times. Current President Nicanor Duarte Frutos has implemented some reforms that have addressed corruption and contributed to economic growth. Yet, due in large part to the country’s authoritarian past, Paraguay’s state institutions remain weak while corruption remains ingrained in the political culture, impeding democratic consolidation and economic development. The April 2008 presidential elections could serve as a test of the strength of Paraguay’s democracy since the Colorado Party faces the possibility of losing its dominance after 60 years in power. At this juncture, the opposition is divided between support for former Catholic priest Fernando Lugo and former General Lino Oviedo. U.S.-Paraguayan relations have been strong, with extensive cooperation on counterterrorism and counternarcotics efforts. For additional information, see CRS Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy and CRS Report RS21049, Latin America: Terrorism Issues. This report will be updated as events warrant. Contents Introduction ......................................................1 Political Situation ..................................................1 Corruption ...................................................3 2008 Presidential Elections ......................................3 Economic Situation ................................................4 Relations with the United States ......................................5 U.S. Aid.....................................................5 Counternarcotics Cooperation ....................................6 TBA and Terrorism ............................................6 Paraguay: Background and U.S. Relations Introduction Paraguay – a landlocked South American country bordering Argentina, Bolivia and Brazil – has a population of 6.5 million predominately concentrated in and around the capital city of Asunción. The majority of the population is of mixed Spanish and Guaraní Indian descent. Both Spanish and Guaraní are the official languages, with over 90% of the population fluent in Guaraní. Paraguay’s per capita income in 2005 was $1,280, one of the lowest in South America, and over 40% of the population live in poverty. Political Situation1 The current political context in Paraguay has been shaped by the country’s turbulent political history. In the late 19th century, a two-party system emerged with the formation of the Colorado Party and the Liberal Party, but the Colorado Party soon became the dominant political force, ruling between 1887 and 1904. Paraguay was defeated in the War of the Triple Alliance (1864-1870) against Argentina, Brazil and Uruguay and lost 25% of its territory and over half of its population. This defeat led to an extensive period of political instability, with three civil wars in the first half of the 20th century and a war with Bolivia between 1932-1935, the Chaco War, that further weakened political institutions and hindered economic development. The Liberals ruled from 1904 until 1940, until the military assumed control with a succession of authoritarian leaders. The Colorado Party returned to power in 1946, and has remained in power until the present day, making it the longest-ruling political party in the world. In the late 1940s, the party began to assume greater control over state institutions and the bureaucracy to the point where party membership was a prerequisite for civil service positions and promotion in the military, further perpetuating the Colorado Party’s dominance. General Alfredo Stroessner, who was a member of the Colorado Party, staged a coup in 1954, and consolidated power in a repressive military dictatorship that lasted 35 years. The key to the Stroessner regime’s longevity was an alliance among 1 Sources for the historical information in this section include Diego Abente Brun, “Uruguay and Paraguay: An Arduous Transition,” in Jan Knippers Black (ed.), Latin America: Its Problems and Its Promise, Cambridge MA, Westview Press, 2005; and Paul C. Sondrol, “Paraguay: Precarious Democracy” in Howard J. Wiarda and Harvey F. Kline (eds.), Latin American Politics and Development, Boulder Colorado, Westview Press, 2000. CRS-2 the military, dominant economic groups, and the Colorado Party. The military regime was characterized by strong political repression, the personalization of authority, ultra-nationalist and anti-communist rhetoric, and widespread corruption. With democratic advances occurring in other South American countries, Stroessner ultimately was overthrown in a 1989 coup and fled to Brazil, where he lived until his death in 2006. In 2004, a Truth and Justice Commission ultimately was set up to investigate human rights abuses that occurred under the Stroessner regime. The overthrow of the Stroessner regime initiated a process of democratization, with the enactment of a new constitution in 1992 and competitive elections held for the first time in 1993. Despite the democratic transition, however, many characteristics of the country’s extensive period of military rule have persevered. Although opposition parties have held a majority in Congress, the dominance of the Colorado Party has remained intact, including its control over the state apparatus. The political culture has remained a product of the country’s authoritarian past with pervasive corruption and clientelism. Nascent democratic institutions have been weak and almost every post-Stroessner President has faced some legal troubles. In 1996, Army Commander General Lino Oviedo revolted after President Juan Carlos Wasmosy ordered him to step down. Oviedo resigned, but attempted to run in the 1998 presidential elections as the Colorado Party’s candidate. Oviedo’s candidacy was nullified after the Supreme Court upheld his conviction and ratified a 10-year prison term for his barracks revolt. Oviedo’s running mate, Raúl Cubas, was elected President in 1998 and defied the Supreme Court by freeing Oviedo from prison as one of his first acts in office. This action led to the initiation of impeachment proceedings against the President, and intensified the rivalry between Vice President Luis Maria Argaña and President Cubas and Oviedo. Argaña was assassinated in March 1999 and blame was placed on both Cubas and Oviedo, sparking widespread demonstrations and violence in Asunción. President Cubas was forced to resign, and both he and Oviedo fled the country. As a result, Luis Gonzalez Macchi, the president of the Senate, completed the presidential term and attempted to establish a government of national unity, but constant infighting within the coalition led to a weak government that was marred by corruption and inefficiency.2 Nicanor Duarte Frutos of the Colorado Party (National Republican Association or ANR) was elected president on April 27, 2003, defeating Julio César Franco of the opposition Authentic Radical Liberal Party (PLRA, related to the original Liberal Party) as well as three other candidates in an election that observers judged to be free and fair. The Colorado Party also captured 37 seats in the 80-member Chamber of Deputies, the largest block, and 16 of 45 seats in the Senate, while the largest opposition party, the PLRA, won 21 seats in the lower house and 12 seats in the Senate. Three smaller parties won the remaining seats. During the campaign, Duarte portrayed himself as a strong leader, and he promised to implement widespread institutional reforms, prioritize the fight against corruption and establish a transparent government. As discussed below, President Duarte has enacted reforms that tackle tax evasion and corruption. Since his election, however, the President’s popularity has declined because of public concerns about rising crime and unemployment. As 2 Brun, p. 576. CRS-3 a result, he has resorted to more populist rhetoric as a means of retaining support for the Colorado Party. Corruption Observers maintain that corruption remains a major impediment to the emergence of stronger democratic institutions and sustainable economic development in Paraguay. President Duarte’s measures to combat corruption have included increased penalties for tax evasion and other measures to increase tax revenue, greater oversight of government spending, and a crackdown on the trade of contraband and counterfeit goods. He also removed members of the Supreme Court after corruption allegations surfaced against them. These measures have been partially successful, as evident in Transparency International’s 2006 corruption perceptions index in which Paraguay ranked 111 out of 163 countries.3 This ranking was an improvement from 2004 when the country was classified among the six most corrupt countries in the world and the second most corrupt in the Western Hemisphere.4 The opposition, however, has claimed that anti-corruption efforts have not been far-reaching enough because they have not addressed the clientelism that is pervasive in Paraguayan politics or the dominance of the Colorado Party in governmental institutions. 2008 Presidential Elections President Duarte sought to overturn the constitutional ban on consecutive re- election so that